The additional element of your comparison -- the tax differential is incorrect because it ignores the time value of money.

Good point. I suppose one could consider the differential in marginal tax rates a "compounded return" of 5%, so to speak (36% minus 31%). It would be a valid "time value" interest rate of 5% as is if the alternatives were to either withdraw now or withdraw one year from now. Since I have three years to go until retirement, the average annulized rate is found by solving 1.05 = (1 + i)^3 and comes out to be i= .0164 (1.64%) .

My major word of advice would be for you to consider moving the funds in your money market into a higer yielding investment. Depending on your risk tolerance I would either suggest GNMA's or higher yielding corporate bonds.

As I stated in my original post, my objective for these funds is to retire the mortgage. It is only a question of when. Thus, during the next 3 years protection of principle is paramount in importance. That is why the funds are in MM. I supose a bit more could be gained by short bonds or CD's without risk of principle.

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